Savers likely to increase pension contributions

75% of 25 to 34-year-olds with a workplace pension said they would increase their pension contributions in line with a pay rise.

Insurance company Royal London polled 1,500 ‘millennials’ and found 40% plan to increase their monthly contributions next year.

Employers are required to make a minimum contribution into a workplace pension, which is currently 1%. This will increase to 2% in 2018/19 and 3% from 2019/20.

A further 74% of respondents would continue to save into their workplace pension if total contributions increased automatically to 5%, with 3% from their employer and 2% from them.

However, if total contributions increased to 8% (employee paying 5% and employer paying 3%) only 62% of people would continue to save into their workplace pension.

If contributions were matched (employer and employee paying 4% each), 76% would be willing to continue saving into their pension.

Jamie Clark, pensions business development manager at Royal London, said:

“It’s great to see that automatic gradual increase in contributions, perhaps in line with pay rises, is potentially viewed by millennials as a way to help lessen the financial impact.

“However, although saying they are saving, there is the risk some may still sleepwalk into poverty in their retirement by not regularly reviewing their savings and not taking advantage of opportunities to increase their pension savings when possible.”